The U.S. Commodity Futures Trading Commission (CFTC) has taken a major step toward formalising federal oversight of prediction markets by publishing an Advanced Notice of Proposed Rulemaking (ANPRM) that seeks public comment on whether to amend or issue new regulations for event contracts traded on these platforms. The action comes as prediction markets, including sports and other real‑world event contracts, grow in popularity, drawing participation from both retail and institutional investors.
The ANPRM marks a key phase in the CFTC’s effort to establish a clearer regulatory framework under the Commodity Exchange Act (CEA) and reassert its exclusive jurisdiction over these markets, even as state regulators and gaming authorities debate overlapping oversight and governance models.
CFTC’s Advanced Notice: What’s Open for Public Comment
The published Advanced Notice of Proposed Rulemaking invites stakeholders to weigh in on core questions that could shape how prediction markets are regulated in the U.S.:
- Statutory application: How existing CEA requirements, including anti‑manipulation and market integrity principles, apply to prediction markets.
- Contract scope: What types of event contracts (e.g., sports outcomes, political events, economic indicators) should be permitted or potentially prohibited for trading.
- Public interest considerations: Whether certain contracts may be “contrary to the public interest” and warrant specific prohibitions under federal regulation.
- Cost‑benefit analysis: How regulatory costs and market benefits should be balanced in any future rulemaking.
Written comments are due within 45 days of the ANPRM’s publication in the Federal Register and may be submitted through the CFTC’s Public Comments Portal.
Chairman Selig Emphasises Responsible Innovation and Investor Protection
In accompanying remarks, CFTC Chairman Michael S. Selig described the move as a step toward balancing innovation with investor protection. He emphasised that the ANPRM reflects the Commission’s intent to promote responsible innovation in derivatives markets while clarifying the CFTC’s exclusive jurisdiction over prediction markets. Selig said.
Today’s action is an important step in the Commission’s continued effort to promote responsible innovation in our derivatives markets. This begins the process of new rulemaking grounded in a rational and coherent interpretation of the Commodity Exchange Act, while reassuring the American people that the CFTC will exercise its exclusive jurisdiction over prediction markets.
The guidance process and public comment phase aim to build a foundation for potential future rulemaking, signalling a more structured federal approach to governing this emerging and rapidly evolving segment of the markets.
The Growing Importance of Prediction Markets in U.S. Regulatory Debates
Prediction markets, platforms that allow traders to buy and sell event contracts tied to the outcomes of real‑world events, have seen explosive growth and heightened visibility in recent years. Activity in these markets surged during high‑profile events such as the 2024 U.S. presidential election, where price signals from prediction markets often outperformed conventional polling methodologies.
However, this growth has raised jurisdictional and regulatory questions: while the CFTC asserts its authority under the Commodity Exchange Act, some state regulators maintain that prediction markets resemble gambling products that fall under state law, especially for sports‑related contracts.
The ANPRM addresses these pressures by seeking input on the scope and limits of federal oversight, including core principles like anti‑manipulation protections, market integrity, and the public interest. Public comment will help inform whether the CFTC should craft a comprehensive regulatory regime tailored to the unique characteristics of event contracts and prediction markets.
Aligning Federal Oversight with Industry Needs: A Balancing Act
The rulemaking initiative also dovetails with broader industry and regulatory discussions. Major U.S. exchange leaders have previously called for consistent federal regulation of prediction markets to provide clarity and investor protection, particularly as retail participation grows.
News coverage has highlighted regulators’ concern with potential vulnerabilities, including the risk of manipulation in certain contracts and the need for robust surveillance and compliance standards, as part of shaping thoughtful oversight.
What Comes Next: Public Comments and Future Rulemaking
The publication of the ANPRM marks the first formal request for public comment in what could be a longer rulemaking process toward establishing specific prediction market regulations under the CEA. Key parties expected to weigh in include exchange operators, market participants, advocacy groups, and other federal and state authorities.
Once comments are reviewed, the CFTC may propose a set of draft rules or amendments, which would undergo additional public consultation and review before any final regulation is adopted. This transparent, multi‑stage process reflects the Commission’s effort to build a coherent and enforceable regulatory framework that can accommodate market innovation while protecting market integrity and the public interest.